Chef’d, a national meal-kit operator serving major food brands and prominent chefs, has suspended operations after burning through investments and failing to secure more cash.

The development is a troubling sign for the meal-kit sector as venture capital-backed startups seek to become profitable in an increasingly competitive food segment, and startups seek to scale up into national operations that can provide customers with ever more choices.

Chef’d, a Los Angeles-based startup launched in 2015, operates a complex food manufacturing business that distributed meal kits to a growing list of retailers while also running an e-commerce site for home delivery with far greater options than most rivals. Chef’d was valued at around $160 million during its last fundraising round last year.

But in recent months, it has churned through tens of millions of dollars in cash from venture capitalists and big food companies such as
Campbell Soup Co.
and Smithfield Foods Inc., according to people familiar with the matter.

The company lost a number of executives, along with several junior employees in product development and sales, as finances grew shakier in the past several months, the people said. Executives scrambled to secure new financing from major banks and private investors, but talks didn’t progress, they said.

“Due to some unexpected circumstances with the funding and business, I regret to inform that Chef’d has ceased all operations until our investors and lenders decide the final fate of the company,” the company’s chief technology officer wrote in an email to a supplier Tuesday. “Consequently, please cease all work associated with Chef’d.”

Chef’d issued layoff notices to employees Monday and is informing suppliers that it is suspending business.

A spokeswoman for Chef’d said she was no longer retained by the company.

Many meal-kit companies have struggled as the sector has grown more crowded and retaining online customers increasingly expensive.

Companies such as
Blue Apron Holdings Inc.
and HelloFresh SE are expanding their online meal options and pushing into retail to try to push growth, but other meal-kit operators have sold or are seeking exits.

Chef’d was one of the earliest companies to simultaneously sell its boxes in stores and online. The company developed sophisticated operations that could assembly kits from a thousand different recipes, as opposed to a handful of weekly menus offered by most others. That flexibility helped Chef’d strike deals with major food companies and diet plans—including the
Coca-Cola Co.
, Hershey’s Co. and Weight Watchers—to feature their products in boxes. Campbell Soup Co. and Smithfield Foods Inc., legacy manufacturers looking to pivot into fresh food, took $35 million stakes in the company to try to boost their brands.
Wolfgang Puck
and dozens of other chefs put their names behind meal-kits sold on Chef’d.

“Seven days a week, we offer thousands of choices anywhere in the country. It’s a logistic company in the end,” said
Kyle Ransford,
Chef’d chief executive, in a recent interview.

Chef’d was also one of the first to feature its kits in grocery stores. Smithfield has Chef’d-made kits in 445 stores, one of the biggest national rollouts to date, with future expansion plans set for this year.

But running both operations has proven tricky, with the online service proving particularly difficult to generate profits given high shipping costs and managing so many recipes at once, the people familiar with the matter said. Some meal options went unsold or spoiled.

Chef’d’s e-commerce operation trailed subscription-based meal-kit rivals, and its sales have dropped sharply since March, according to an analysis of anonymized credit- and debit-card transactions by data firm Second Measure.

In recent months, the company began running behind on its accounts to produce, meat and other suppliers. “They are definitely having growing pains,” said
Peter Testa,
president of the Chicago-based Testa Produce Inc., a major wholesaler that has supplied Chef’d but has seen its accounts fall behind. “It is a tough business.”